Sharma v Soar Aviation Aircraft Holdings Pty Ltd

[2024] NSWDC 567

District Court

New South Wales

Medium Neutral Citation:

Sharma v Soar Aviation Aircraft Holdings Pty Ltd & Anor [2024] NSWDC 567

Hearing dates:

15 November 2024

Date of orders:

29 November 2024

Decision date:

29 November 2024

Jurisdiction:

Civil

Before:

Russell SC DCJ

Decision:

(1) Grant leave pursuant to ss 4 and 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) to join Certain Underwriters at Lloyd’s of London as the third defendant to these proceedings.

(2)   Grant leave to the plaintiffs to discontinue these proceedings against the first defendant and the second defendant, with no order as to costs between those parties.

(3)   Grant leave to the plaintiffs to file an Amended Statement of Claim which:

(a)   Reflects the order above for the joinder of Certain Underwriters at Lloyd’s of London as a third defendant.

(b)   Reflects the discontinuance of the proceedings against the first and second defendants.

(c)   Adds an alternative claim based upon breach of duty of care.

(4)   Order that the costs of and incidental to the Amended Notice of Motion be costs in the cause.

Catchwords:

CIVIL PROCEDURE – parties – leave to join insurer as a defendant – arguable case against holder of insurance policy – arguable case that the liability of the policy holder is an insured liability

CIVIL PROCEDURE – pleadings – leave to plead alternative claim in negligence – not futile to plead alternative cause of action for breach of duty

Legislation Cited:

Civil Aviation (Carriers’ Liability) Act 1959 (Cth) Pt IV, ss 27, 28, 31, 35

Civil Aviation (Carriers’ Liability) Act 1967 (NSW)

Civil Liability Act 2002 (NSW) s 5L

Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) ss 4, 5

Cases Cited:

Agtrack (NT) Pty Ltd v Hatfield (2005) 223 CLR 251

Avant Insurance Ltd v Burnie [2021] NSWCA 272

Campbell v Hay [2014] NSWCA 129

Endeavour Energy v Precision Helicopters Pty Ltd [2015] NSWCA 169

Jones v Airlines of Tasmania Pty Ltd (unreported), Supreme Court of Tasmania, Wood J, 5 October 2023, File Number 3737/2016

Mrdajl v Southern Cross Constructions (NSW) Pty Ltd(In Liq) [2018] NSWSC 161

Parkes Shire Council v South West Helicopters Pty Ltd [2019] HCA 14; (2019) 266 CLR 212

Pel-Air Aviation Pty Ltd v Casey (2017) 93 NSWLR 438

Category:

Procedural rulings

Parties:

Nandini Sharma (First Plaintiff)
Rajneesh Sharma (Second Plaintiff)
Shivank Sharma (Third Plaintiff)
Soar Aviation Aircraft Holdings Pty Ltd (First Defendant)
Gobel Aviation Pty Ltd trading as Soar Advanced Flight Training (Second Defendant)
Certain Underwriters at Lloyd’s of London (Respondent to Plaintiffs’ Amended Notice of Motion)

Representation:

Counsel:
R Royle (Plaintiffs)
M Kalyk (Respondent)

Solicitors:
MTM Legal (Plaintiffs)
GSG Legal (Respondent)

File Number(s):

2022/331223

Publication restriction:

Nil

JUDGMENT

Introduction

1. On 4 November 2020 light aircraft registered number VH-OIS (the aircraft) crashed near Carcoar in New South Wales. Ms Shipra Sharma was a student pilot on the aircraft. Ms Sharma and the pilot Mr Kapoor died in the crash.

2. By a Statement of Claim filed on 4 November 2022 the first and second plaintiffs (the parents of Ms Sharma) and the third plaintiff (the sister of Ms Sharma), seek damages for nervous shock arising from the death of Ms Sharma, and her funeral expenses.

3. The first defendant Soar Aviation Aircraft Holdings Pty Ltd (Soar Aviation) is alleged in the Statement of Claim to have operated a flight school business. The Statement of Claim pleads that the second defendant Gobel Aviation Pty Ltd (Gobel Aviation) held the Air Operator’s Certificate for the aircraft. The Statement of Claim pleads that Soar Aviation and Gobel Aviation operated the aircraft and had the care, control and management of the aircraft.

4. The Statement of Claim pleads the following background facts:

1. The aircraft departed Bankstown Airport at approximately 1430 hours on 4 November 2020.

2. Mr Kapoor was the instructor pilot in charge of the aircraft.

3. Ms Sharma was a student pilot in the aircraft.

4. The aircraft arrived at Orange just prior to 1600 hours and landed without incident.

5. The aircraft departed Orange at approximately 1640 hours.

6. The aircraft then travelled to the Coombing Park Aeroplane Landing Area (ALA) near Carcoar.

7. At about 1709 hours the aircraft crashed into the bank of a small dam on rising land near the end of the ALA.

5. The Statement of Claim pleads a cause of action against the two defendants pursuant to the Civil Aviation (Carriers’ Liability) Act 1967 (NSW) (the NSW Carriers’ Act) and the Civil Aviation (Carriers’ Liability) Act 1959 (Cth) (the Carriers’ Act). The Statement of Claim wrongly states the year of each Act, but it is clear enough that the plaintiffs are relying on a statutory cause of action pursuant to the NSW Carriers’ Act and the Carriers’ Act.

6. The Statement of Claim pleads that the crash was “an accident” within the meaning of both Acts and that as a result of the crash Ms Sharma sustained fatal injuries.

Plaintiffs’ Amended Notice of Motion

7. The plaintiffs filed a Notice of Motion on 21 November 2023. An Amended Notice of Motion was filed on 27 August 2024. It sought the following orders:

“1. Leave granted to:

a. Join Certain Underwriters at Lloyd’s of London, the insurer of the first defendant and the second defendant in liquidation, to the proceedings pursuant to section 4 and 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017.

b. Amend the Statement of Claim filed 4 November 2022.

2. Leave to discontinue the proceedings against the named first defendant, Soar Aviation Aircraft Holding Pty Ltd (in liquidation), and the second defendant, Gobel Aviation Pty Ltd t/a Soar Aviation (in liquidation).

3. The costs of this motion be costs in the cause.”

8. The documents relevant to the Amended Notice of Motion which is the subject of this judgment, including the affidavits, are contained in a Court Book (CB).

9. A proposed Amended Statement of Claim is annexed to the affidavit of Mary Maloney solicitor dated 6 September 2024 (PX 3). The proposed amendment adds Certain Underwriters at Lloyd’s of London (the Respondent) as a third defendant. The other significant proposed amendment is to add an alternative claim for breach of a common law duty of care (see pars 16-22 of the proposed Amended Statement of Claim at CB 164-166).

The Civil Liability (Third Party Claims Against Insurers Act) 2017 (NSW)

10. Soar Aviation and Gobel Aviation are both corporations in liquidation. For that reason the plaintiffs seek leave to sue the Respondent as the insurer of the two defendants. The application is brought pursuant to the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) (the Third Party Claims Act).

11. Section 4 of the Third Party Claims Act provides as follows:

“4   Claimant may recover from insurer in certain circumstances

(1)  If an insured person has an insured liability to a person (the claimant), the claimant may, subject to this Act, recover the amount of the insured liability from the insurer in proceedings before a court.

(2)  The amount of the insured liability is the amount of indemnity (if any) payable pursuant to the terms of the contract of insurance in respect of the insured person’s liability to the claimant.

(3)  In proceedings brought by a claimant against an insurer under this section, the insurer stands in the place of the insured person as if the proceedings were proceedings to recover damages, compensation or costs from the insured person. Accordingly (but subject to this Act), the parties have the same rights and liabilities, and the court has the same powers, as if the proceedings were proceedings brought against the insured person.

(4)  This section does not entitle a claimant to recover any amount from a re-insurer under a contract or arrangement for re-insurance.”

12. In Mrdajl v Southern Cross Constructions (NSW) Pty Ltd(In Liq) [2018] NSWSC 161 at [12], Walton J identified four elements in s 4 as follows:

1. There is an insurer in existence.

2. The insurer has issued a policy to the relevant defendant.

3. The policy covers the risk.

4. The policy was in place at the time of the risk.

13. Elements 1, 2 and 4 are not presently in dispute. Element 3 is in dispute.

14. Section 5 of the Third Party Claims Act provides as follows:

“5   Leave to proceed

(1) Proceedings may not be brought, or continued, against an insurer under section 4 except by leave of the court in which the proceedings are to be, or have been, commenced.

(2) An application for leave may be made before or after proceedings under section 4 have been commenced.

(3)  Subject to subsection (4), the court may grant or refuse the claimant’s application for leave.

(4)  Leave must be refused if the insurer can establish that it is entitled to disclaim liability under the contract of insurance or under any Act or law.”

15. In Avant Insurance Ltd v Burnie [2021] NSWCA 272 at [8] the Court of Appeal held that an applicant for leave under s 5 of the Third Party Claims Act is required to establish the following three elements:

1. That there is an arguable case against the holder of the insurance policy.

2. That there is a reasonable possibility that the holder of the insurance policy will be unable to satisfy any judgment.

3. That there is an arguable case that the holder of the insurance policy would, if found liable to the plaintiff, be entitled to indemnity under the policy - to put it another way, that any liability of the holder of the insurance policy to the plaintiff is, in the language of s 4 of the Third Party Claims Act, an “insured liability”.

16. Elements 1 and 3 are in dispute. Element 2 was not disputed; indeed there was evidence that neither of the companies in liquidation have any funds.

The Carriers’ Liability Legislation

17. The combined effect of the NSW Carriers’ Act and the Carriers’ Act is that Pt IV of the Carriers’ Act applies to domestic air travel within Australia. Section 27(1) of the Carriers’ Act provides that Pt IV applies to the carriage of a “passenger” where the passenger is carried in an aircraft being operated by a holder of an airline licence or a charter licence in the course of commercial transport operations.

18. Section 28 of the Carriers’ Act provides as follows:

“Liability of the carrier for death or injury

Subject to this Part, where this Part applies to the carriage of a passenger, the carrier is liable for damage sustained by reason of the death of the passenger or any bodily injury suffered by the passenger resulting from an accident which took place on board the aircraft or in the course of any of the operations of embarking or disembarking.”

19. The plaintiffs will bear the onus of proving that Ms Sharma was a “passenger” on the aircraft. The plaintiffs will not need to prove a breach of duty of care, as the scheme of the Carriers’ Act is to make a carrier automatically liable for damage sustained by reason of the death of a passenger where that death resulted from “an accident” which took place on board the aircraft. The damages recovered have a monetary limit prescribed under s 31 of the Carriers’ Act.

20. Section 35 of the Carriers’ Act provides as follows:

“Liability in respect of death

(1) The provisions of this section apply in relation to liability imposed by this Part on a carrier in respect of the death of a passenger (including the injury that resulted in the death).

(2) Subject to section 37, the liability under this Part is in substitution for any civil liability of the carrier under any other law in respect of the death of the passenger or in respect of the injury that has resulted in the death of the passenger.

(3) Subject to the next succeeding subsection, the liability is enforceable for the benefit of such of the passenger's family members as sustained damage by reason of his or her death.

(4) To the extent that the damages recoverable include loss of earnings or profits up to the date of death, or funeral, medical or hospital expenses paid or incurred by the passenger before his or her death or by his or her personal representative, the liability is enforceable for the benefit of the personal representative of the passenger in his or her capacity as personal representative.

(6) The action to enforce the liability may be brought by the personal representative of the passenger or by a person for whose benefit the liability is, under the preceding provisions of this section, enforceable, but only one action shall be brought in respect of the death of any one passenger, and such an action, by whomsoever brought, shall be for the benefit of all persons for whose benefit the liability is so enforceable who are resident in Australia or, not being resident in Australia, express the desire to take the benefit of the action.

(7) The damages recoverable in the action include loss of earnings or profits up to the date of death and the reasonable expenses of the funeral of the passenger and medical and hospital expenses reasonably incurred in relation to the injury that resulted in the death of the passenger.

(8) In awarding damages, the court or jury is not limited to the financial loss resulting from the death of the passenger.

(9) Subject to the next succeeding subsection, the amount recovered in the action, after deducting any costs not recovered from the defendant, shall be divided amongst the persons entitled in such proportions as the court (or, where the action is tried with a jury, the jury) directs.

(10) The court may at any stage of the proceedings make any such order as appears to the court to be just and equitable in view of the provisions of this Part limiting the liability of the carrier and of any proceedings which have been, or are likely to be, commenced against the carrier, whether in or outside Australia.”

21. If a plaintiff has a claim which falls under the Carriers’ Act, then the carrier cannot also be liable at common law, because of s 35(2). This is known as the “exclusivity principle”. This is recognised in the proposed Amended Statement of Claim because the common law action is pleaded in the alternative to the statutory Carriers’ Act action.

The Policy and the Schedule

22. The plaintiffs rely upon a policy of insurance (Policy) at CB 115-152 and the schedule (Schedule) to that Policy, at CB 153-158.

23. The Schedule provides as follows:

1. The Policy number is H3-36920.

2. Item 1 in the Schedule lists six companies which are insured under the Policy. These companies include Soar Aviation and Gobel Aviation.

3. Item 2 in the Policy provides that the period of insurance is 29 December 2019 to 29 December 2020. The crash occurred within this period.

4. While the Schedule is heavily redacted, it states that the Policy covers the aircraft.

5. Item 6 of the Schedule sets out the Purposes of Use. The third listed purpose is “Flying School Uses (including ab-initio training)”.

6. Item 13 in the Schedule lists the insurer as “Certain Underwriters at Lloyd’s of London”.

24. The front page of the Policy says that it is an “Aircraft Hull and Liability Insurance Policy”. That page is headed “Catalyst Aviation Insurance”.

25. Section 1 of the Policy covers physical loss or damage to the aircraft.

26. Section 2 of the Policy covers “Legal Liability to Third Parties (other than passengers)”. Within section 2, clause 1 is headed “Coverage” and provides (CB 127):

“The Insurers agree to pay on behalf of the Insured all sums which the Insured shall become legally liable to pay as compensatory damages for Bodily Injury and/or Property Damage to third parties caused by an Occurrence arising from the use of the Aircraft by the Insured.

The liability of the Insurers under this Section shall not exceed the applicable Limits as specified in Item 4 of the Policy Schedule.”

27. Section 3 of the Policy is headed “Legal Liability to Passengers”. Clause 1 under s 3 is headed “Coverage”. It says (CB 128):

“The Insurers agree to pay on behalf of the Insured all sums which the Insured shall become legally liable to pay as compensatory damages for:

(a) Bodily Injury to passengers whilst entering, on board, or alighting from the Aircraft caused by an Occurrence and

(b) Property Damage to baggage and personal effects of passengers caused by an Occurrence whilst such baggage and personal effects are in the care, custody or control of the Insured for the purpose of carriage by air.”

28. The phrase “Bodily Injury” is defined in the Policy (CB 121) as “bodily injury, sickness or disease including death at any time resulting therefrom”.

29. The word “Occurrence” is defined in the Policy (CB 121) to mean “an accident … which results in Bodily Injury … which is neither expected nor intended from the standpoint of the Insured”.

30. The word “Passenger” is defined in the Policy (CB 121) to mean:

“Persons who are not the pilot in command, including student pilots undergoing instructions, whilst entering, on board or alighting from the aircraft.”

31. The Policy also sets out the “Conditions Precedent to Sections 1, 2 and 3” (CB 138). The solicitor for the Respondent has indicated in correspondence (CB 403-408) that the insurer relies upon Conditions Precedent 1 and 2(c). Those Conditions Precedent provide:

“It is necessary that the Insured observes and fulfils the following Conditions before the Insurers have any liability to make any payment under this Policy.

1. The Insured shall at all times use due diligence and do and concur in doing everything reasonably practicable to avoid or diminish any loss hereon.

2. The Insured shall comply with all air navigation and airworthiness orders and requirements issued by any aviation authority having jurisdiction affecting the safe operation of the Aircraft and shall ensure that:

…

(c) the employees and agents of the Insured comply with such orders and requirements.”

Submissions for the Plaintiffs

Arguable Case against the Insured

32. The case against the Insured under the Carriers’ Act is that the various provisions of the legislation are satisfied and thus there is statutory liability for damages for nervous shock suffered by close relatives of the deceased student pilot.

33. The plaintiffs submit that Pt IV of the Carriers’ Act applies because Ms Sharma was a “passenger” and the carrier is “liable for damage sustained by reason of the death of the passenger” and such death resulted from “an accident which took place on board the aircraft”. These are all elements contained in s 28 of the Carriers’ Act. The authorities have recognised that the Carriers’ Act does apply where the claim is one for nervous shock suffered by family members arising from the death of a passenger: Parkes Shire Council v South West Helicopters Pty Ltd [2019] HCA 14; (2019) 266 CLR 212 (Parkes) and Jones v Airlines of Tasmania Pty Ltd (unreported), Supreme Court of Tasmania, Wood J, 5 October 2023, File Number 3737/2016 (Jones).

34. In relation to the proposed alternative common law action, the plaintiffs submit (MFI 1) that the proposed Amended Statement of Claim sets out the elements of a common law claim, and in particular, the plaintiffs emphasise that Mr Kapoor was in control of the aircraft when it struck a small hill at the end of the ALA. This event alone is sufficient to raise, it is submitted, a presumption of negligence on the part of the pilot.

Arguable Case that the Policy Responds to the Claim

35. The plaintiffs submit as follows:

1. The Schedule to the Policy identifies Soar Aviation and Gobel Aviation as “insured and interested parties” and the period of insurance covers the date of the crash.

2. The Policy provides cover in Section 2 for “legal liability to third parties (other than passengers)” and in Section 3 “legal liability to passengers”.

3. Damages for the plaintiffs for nervous shock are sums which the Insured becomes legally liable to pay as compensatory damages for “Bodily Injury”, which is defined to include death. Thus Section 2 of the Policy provides cover.

4. Section 3 of the Policy provides cover to the Insured for all sums which the Insured becomes legally liable to pay as “compensatory damages” for “Bodily Injury” to passengers, which is defined to include death. Nervous shock claims by close relatives are sums which a defendant becomes legally liable to pay as compensatory damages by reason of the death of a passenger. Thus Section 3 of the Policy applies.

1. The definition of “passenger” means persons who are not the pilot in command, and passenger is defined to include student pilots undergoing instruction. This was the status of Ms Sharma onboard the aircraft. She was thus a “passenger”.

Conditions Precedent

36. In relation to cl 1 of the Conditions Precedent, the plaintiffs submit that there is no evidence that due diligence was not used in the operation of the aircraft on the day of the crash. Further, the plaintiffs submit that the construction of cl 1 is not as black and white as put forward by the Respondent. The Policy would have no value if there was no cover for any negligent act by the Insured.

37. In relation to cl 2(c) of the Conditions Precedent, the plaintiffs note that the Respondent relies upon an alleged failure to comply with a document entitled “CAAP 92-1(1)”. The plaintiffs point out that this document is said to be advisory only and there is no legal requirement to observe the details set out in that publication.

Submissions for the Respondent

Nervous Shock is Not Bodily Injury

38. Counsel for the Respondent submitted that a claim under the Carriers’ Act is restricted to a claim for bodily injury, which does not include psychiatric harm: Pel-Air Aviation Pty Ltd v Casey (2017) 93 NSWLR 438 (Pel-Air). I reject the submission. Pel-Air held that where a passenger suffered injury in an aircraft accident, that passenger could only make a claim for bodily injury but could not make a claim for psychiatric damage. There is no such restriction in s 28 or s 35 of the Carriers’ Act. A claim for nervous shock by a close relative of a deceased passenger is a claim for damage sustained by reason of the death of the passenger. As a result of Pel-Air a passenger who suffers psychiatric injury cannot make a claim for that part of their damage, but there is no restriction on a nervous shock claim being brought by close relatives of a deceased passenger. This was recognised by the High Court in Parkes and by the Supreme Court of Tasmania in Jones.

39. The Policy would arguably cover such a claim, as the phrase “Bodily Injury” in the Policy is defined to include death.

Exclusivity Under the Carriers’ Act

40. Counsel for the Respondent submitted that any liability under the Carriers’ Act is in substitution for any civil liability the carrier has under any other law in respect of the death: Agtrack (NT) Pty Ltd v Hatfield (2005) 223 CLR 251 at [4]. It was submitted (MFI 2, par 28) that where the Carriers’ Act is engaged, other remedies such as negligence are excluded. This is the “exclusivity principle”. Counsel for the Respondent submitted that the proposed common law pleading was futile and would be summarily dismissed, because the only claim the plaintiffs have is under the Carriers’ Act (MFI 2, par 36).

41. I reject this submission. The Respondent wishes to argue that Ms Sharma, a student pilot on the flight, was not a passenger, and thus s 28 of the Carriers’ Act does not come into play, because it only applies where there has been the death of a passenger resulting from an accident which took place on board the aircraft.

42. There is a debate between the parties as to whether or not Ms Sharma was a passenger within the meaning of the Carriers’ Act. Counsel for the plaintiffs pointed to the decision of the Court of Appeal in Endeavour Energy v Precision Helicopters Pty Ltd [2015] NSWCA 169, in support of the proposition that Ms Sharma was a passenger. Whether or not Ms Sharma was a passenger within the meaning of the Carriers’ Act is a matter which can only be decided after evidence has been received on the topic. For the moment, it is sufficient to note that one of the arguments advanced for the Respondent is that the Carriers’ Act does not apply is because Ms Sharma was not a passenger. That being so, it is not futile to plead an alternative cause of action for a breach of duty of care. It may well be that in the long run the claims of the plaintiffs are governed by the Carriers’ Act, in which case the breach of duty of care cause of action will be dismissed by the court. However, if the finding of a trial judge were that the Carriers’ Act does not apply, then the court would be obliged to go on and consider the alternate breach of duty of care argument.

Conditions Precedent

43. The arguments of the Respondent in relation to the Conditions Precedent are set out extensively in the affidavit of Mr Gray-Spencer solicitor dated 11 October 2024 (RX 1). Mr Gray-Spencer says that the Insured did not have a register of suitable ALAs compiled as prescribed in the Operations Manual maintained by the Insured.

44. The Operations Manual was tendered on the hearing of the Motion (RX 4). Section 3B1.8 of the Operations Manual (CB 294) is headed “Company register of suitable ALAs”. It says:

“Form 4B13 (Aeroplane Landings Areas (ALA) Report Form) is to be used for compiling a company register of suitable ALAs of fixed wing aeroplane landing areas that are not listed in the ERSA, but have been approved by the HOO.”

45. This provision is contained in Part 3B of the Operations Manual entitled “Conduct of Training Operations”.

46. Counsel for the Respondent drew attention to a blank form 4B13, to be found at CB 353. Clearly this is a pro forma which is part of the Operations Manual (as per the header at CB 353) and does not purport to be the actual list of approved ALAs. Whether or not there was such a list is not the subject of evidence at the present time. Further, even if there was no such list, there would be an argument between the parties as to whether or not the absence of such a list was a breach of a Condition Precedent in the Policy.

47. Mr Gray-Spencer also refers in his affidavit to par 8.2 of a document issued by the Civil Aviation Safety Authority being publication CAAP 92-1(1). This states:

“A pilot should not use a landing area without taking all reasonable steps to ensure the physical characteristics and dimensions are satisfactory. For aerial work and charter operations the operator should provide evidence to the pilot on the suitability of a landing area prior to its use.”

48. As counsel for the plaintiffs pointed out, the document relied upon by the Respondent commences with these words:

“The information in this publication is advisory only. There is no legal requirement to observe the details set out in this publication.”

49. In those circumstances, the possible non-compliance by the Insured with their own Operations Manual, or non-compliance with CAAP 92-1(1) are matters for evidence, and at this level, do not mean that there is no arguable case that the Policy responds to the claim against the Insured.

The Student Pilot Was Not a “Passenger”

50. Reference has already been made to this argument raised for the Respondent. Whether or not the student pilot was a passenger within the Carriers’ Act has been dealt with above – it is a matter for evidence. Counsel for the plaintiffs pointed to the definition of “Passenger” in the Policy (CB 121). While there is room for argument about the meaning of the definition, I find there is an arguable case that the Policy covers nervous shock arising from the death of a student pilot who is a passenger within the meaning of the Policy.

Flight Not in the Course of Commercial Operations

51. This issue was raised in a letter dated 14 August 2024 which is an annexure to the affidavit of Mr Gray-Spencer (CB 406, par 18). Once again, this is a matter for evidence. However, it is noted that the aircraft, at the time of the crash, was being used to carry out a commercial operation, being the instruction of a student pilot, presumably for monetary reward. In the absence of evidence on the topic, the argument raised about whether or not the flight was in the course of commercial transport operations cannot be determined and is a matter properly for trial.

Dangerous Recreational Activity

52. The Respondent submitted that the Insured, if sued, would have a clear defence under s 5L of the Civil Liability Act 2002 (NSW). This provides:

“(1) A person (“the defendant”) is not liable in negligence for harm suffered by another person (“the plaintiff”) as a result of the materialisation of an obvious risk of a dangerous recreational activity engaged in by the plaintiff.

(2) This section applies whether or not the plaintiff was aware of the risk.”

53. Counsel for the Respondent relied upon the decision of the Court of Appeal in Campbell v Hay [2014] NSWCA 129 (MFI 2, pars 38-40).

54. That case held that flying a light aircraft for recreational purposes constitutes a “dangerous recreational activity”. It is to be noted that in that case it was not disputed that the passenger, who was taking flying lessons in an ultra-light aircraft, was engaged in a recreational activity – at [111]. By contrast, Ms Sharma was taking flying lessons in the aircraft which crashed, with a view to becoming a commercial airline pilot. Presumably Ms Sharma was paying a fee to the Insured to travel in the aircraft as a student pilot. It is therefore a fact to be determined at trial as to whether or not Ms Sharma was engaged in a recreational activity, when she was taking formal flying lessons for a commercial purpose.

55. Further, there would need to be evidence as to whether or not doing so would be a dangerous activity. It is noted that in Campbell v Hay there was reliance upon statistical evidence as to the risks involved in the flying of the particular aircraft which crashed – at [119]-[142]. It would be for the Respondent to identify the risk involved and whether or not such risk materialised. Once again, this would be a matter for evidence at trial. No doubt the s 5L defence is arguable, but in the absence of evidence it is not possible to say that it would necessarily succeed. This leaves the plaintiffs with an arguable common law claim for breach of duty of care.

Deficiencies in the Common Law Pleading

56. Counsel for the Respondent criticised the proposed common law pleading (MFI 2, pars 41-44). In particular, counsel submitted as follows:

1. The proposed pleading does not identify the risk of harm.

2. The allegations are pleaded against “the defendants their servants or agents and in particular Mr Kapoor”, but the pleading does not identify which of these parties owed a duty.

3. Nor does the proposed pleading identify the way in which each of the parties breached any duty of care which was owed.

57. There is some force in these criticisms of the proposed common law pleading. I propose to grant leave to amend to add an alternative claim based in negligence, but I will not make an order that such claim be pleaded in accordance with the proposed Amended Statement of Claim (CB 162-166). Instead, I will grant leave in general terms to add a negligence claim. If there are any perceived deficiencies in the amended pleading, it can be dealt with by requests for particulars, or by the Respondent bringing an application to strike out all or part of the amended pleading.

Conclusion in Relation to Application for Leave to Sue the Insurer

58. For the reasons set out above, I make the following findings:

1. There was an insurer, being Certain Underwriters at Lloyd’s of London, in existence at the time the liability arose.

2. The Respondent had issued a policy to the first and second defendants.

3. The policy arguably covered the risk.

4. The policy was in place at the time of the risk.

5. There is an arguable case against the Insured being the holder of the insurance policy.

6. There is a reasonable possibility, indeed a certainty, that the Insured will be unable to satisfy any judgment.

7. There is an arguable case that the Insured would, if found liable to the plaintiffs, be entitled to indemnity under the policy.

59. In light of those findings it is appropriate to grant leave to sue the Respondent as sought by the plaintiffs.

Conclusion in Relation to Application to Add a Negligence Claim

60. For the reasons set out above, I find that leave should be granted to the plaintiffs to amend the existing Statement of Claim to add an alternative claim based in negligence. However, such leave will be granted in general terms, and attention should be given to the final form of any negligence pleading.

Disposal of the Proceedings Against the First and Second Defendants

61. The Amended Notice of Motion also seeks leave to discontinue the proceedings against the first defendant Soar Aviation and the second defendant Gobel Aviation.

62. The solicitor for the plaintiffs has received correspondence from a solicitor for the liquidator, by which the liquidator consents to the discontinuation of the proceedings, on condition that the subpoena issued to KPMG on 22 December 2023 is withdrawn and KPMG is released from its obligations to comply with the subpoena. The plaintiffs have agreed to that condition and it is therefore appropriate to make an order for discontinuance as sought in the Amended Notice of Motion.

Costs

63. The Amended Notice of Motion sought an order that the costs of the application for joinder and amendment are to be costs in the cause. In my view this is the appropriate order. If the plaintiffs succeed in their claim, which will involve demonstrating that there is a liability in the Insured, and that the Respondent is the insurer on risk for that liability, then it is appropriate that the costs of the Amended Notice of Motion be paid by the Respondent. On the other hand, if the plaintiffs fail in their claim for any reason, then it would be appropriate for any costs order in favour of the Respondent to include the costs of the Amended Notice of Motion.

Orders

64. The orders of the Court are:

1. Grant leave pursuant to ss 4 and 5 of the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW) to join Certain Underwriters at Lloyd’s of London as the third defendant to these proceedings.

2. Grant leave to the plaintiffs to discontinue these proceedings against the first defendant and the second defendant, with no order as to costs between those parties.

3. Grant leave to the plaintiffs to file an Amended Statement of Claim which:

1. Reflects the order above for the joinder of Certain Underwriters at Lloyd’s of London as a third defendant.

2. Reflects the discontinuance of the proceedings against the first and second defendants.

3. Adds an alternative claim based upon breach of duty of care.

4. Order that the costs of and incidental to the Amended Notice of Motion be costs in the cause.

**********

Decision last updated: 29 November 2024